Examining the Relationship Between Audit Quality and Risk Taking in Value Creation: The Role of Company Size as a Mediator
Subject Areas : • Emerging technology in the field of Accounting and its futureHossein Nourani 1 , Razieh Jahandari 2
1 - Assistant Professor, Department of Accounting, Hormozgan University, BandarAbbas, Iran.
2 - Master of Accounting, Department of Accounting, Payame
Keywords: Audit quality, Risk taking, Firm Value, Firm size.,
Abstract :
Objectives: The present study aims to investigate the relationship between audit quality and risk-taking behavior in firms, focusing on the mediating role of company size in value creation.
Design/methodology/approach: This research is applied and employs a causal correlation methodology. The statistical population consists of all firms listed on the Tehran Stock Exchange. A systematic sampling method was utilized to select 140 firms as the study sample, covering a period of 7 years from 2017 to 2022.
Findings: The hypotheses were tested using simple and multiple linear regression analyses after verifying classical assumptions and applying the Chow test due to the mixed nature of the research data. The results indicate that both audit quality and risk-taking have a positive and significant effect on value creation. Additionally, company size plays a crucial mediating role in the relationship between audit quality, risk-taking, and value creation.
Innovation: This ongoing research provides compelling evidence that effective political communication can mitigate the risk of lawsuits against auditors, thereby enhancing audit quality. These findings underscore the importance of integrating governance practices that foster transparency and accountability in financial reporting.
Abu Afif, M.M., Saleh, I. and Taqatqah, F. (2023). "Mediating influence of earnings management in the nexus between audit quality and company value: new proof from Jordanian market", Accounting Research Journal, 36(2). 148-165.
Ahmadi, Mohammad, Ramezan, Jamali, Kamran. (2013). Effect of Audit Quality on Future Return of Listed Companies in Tehran Stock Exchange. Accounting and Audit Reviews. 20(4), 1-20.
Darvishi, M., (2017), Effect of Audit Report Quality on Financial Performance of Listed Companies in Tehran Stock Exchange,8th International Conference on Accounting and Management with the Approach of Modern Research Sciences, Tehran.12(1). 35-50.
Dhifi, K., Zouari-Hadiji, R. (2024). The relationship between audit quality and firm performance: the mediating effect of integrated reporting. 2(10)524-542.
Ebrahimi Kordelar, Ali; Javani Ghalandari, Mousa. (2016). The Impact of Auditor's Expertise on Earnings Quality and Simultaneously Stock Prices. Journal of Accounting and Auditing Reviews. Faculty of Management, University of Tehran. 3(2), 137-154.
Francis, J. R. (2011). A framework for understanding and researching audit quality. Auditing: A journal of Practice & Theory, 30(2), 125-152.
Jahanshad, Azita & Shabani, Davoud, (2015), The Impact of Financing Constraints on the Relationship between Institutional Investors and Sensitivity of Investment Cash Flows, Financial Accounting and Audit Researches, 7(27). 39-56.
Mohammadi, M., Anbari, H., (2020), The moderating effect of audit quality and financial analysts on the readability of financial reporting and agency costs in the companies listed in Tehran Stock Exchange, Shabak, 6(1). 137-188.
Ostadi, Bakhtiar, Tadrisipour, Parvin (2019) Providing a model for measuring the relationship between financial risks and financial ratios. Journal of Empirical Studies of Financial Accounting, 16(33), 109-127.
Pourahmadi, M.H., Farsad Amanolahi, Gholamreza. (2021). The Impact of Organizational Risk Management on the Relationship between External Financing and Earnings Management. Financial Accounting and Audit Research. 13(49). 73-95.
Sayadi, M.; Dastgir, M., Ali Ahmadi, Saeed (2019) The role of corporate risk management on the relationship between management ability and increase investment efficiency. Financial Management Strategy, 7(24), 1-24.
Sri, M., & Solimun, S. (2019). The relationship between audit quality and risk taking toward value creation in Indonesia. Journal of Accounting in Emerging Economies. 12(2), 1-15.
Taghizadeh Khaneghah, Vahid. (2013). The relationship between audit quality and financial reporting quality. The first international conference on political epic (with an approach to developments in the Middle East) and economic epic (with an approach to management and accounting). Islamic Azad University, Roudehen Branch. 10(3). 12-23.
Tehranchian, Mehdi and Daneshvar, Hadi and Refa, S. 2017. The role of audit quality on decision making of information users. The 1st International Conference on Management, Accounting, Economics and Social Sciences, Hamdean. 12(5), 32-48.